March 24, 2015

FDIC reminds smaller banks of risk-based capital option

Financial institutions that are not subject to the advanced approaches risk-based capital rules may elect to calculate regulatory capital using the treatment for accumulated other comprehensive income (AOCI) that is permitted by the Federal Deposit Insurance Corporation’s regulatory capital rules that were in effect before Jan. 1, 2015, according to the FDIC. This means that such an institution can make a one-time, permanent election to opt out of the requirement to include most components of AOCI in regulatory capital. An institution making that choice will be required to:

add to common equity tier 1 capital any net unrealized losses;

subtract from common equity tier 1 capital any net unrealized gains on available-for-sale debt securities; and